Brokers and Forwarders: Here’s a Trend Worth Noting

November 30, 2017

by Wayne Slossberg

Currently, there are over 270 foreign trade zones (FTZs) in operation across the United States and its territories. And, the numbers are steadily climbing. Why? There are two primary answers. First, FTZs offer advantages when it comes to importing and exporting, especially

Deferred payment of duty and federal excise tax, with monies due only when goods leave the FTZ for consumption.

Exemption from state and local ad valorem taxes while products are within the FTZ.

Elimination of duty and excise tax on merchandise exported from the FTZ.

Ability to maintain goods within an FTZ indefinitely.

Freedom to select the most advantageous duty rate, that is, either the rate applicable when the goods entered the zone or the rate applicable on the finished goods leaving the FTZ.

Ability to place merchandise imported under bond within an FTZ to satisfy a legal requirement to export it.

Second, U.S. manufacturing is on an upswing thanks to the “Made in America” movement and the priorities of the Trump Administration. Companies want to take advantage of this new business environment, and FTZs present a viable means to decrease costs and be more competitive in both domestic and foreign markets.

The prospect of establishing an FTZ can be daunting for many importers. Often, they don’t have the bandwidth or an understanding of how to approach the process – or how to complete and submit an application to the Foreign Trade Zones Board. Clearly, the dynamics of the approval process aren’t necessarily difficult but can be somewhat challenging. And, of course, affordability is a concern for smaller importers that don’t want to take on the costs of acquiring a facility, staffing it and operating it.

This “dilemma” has created a business opening – and new revenue streams – for medium to large brokers and forwarders and even 3PLs. Many are looking for additional services to offer clients, and FTZ management and operation fit the bill. In many instances, offering these services and transitioning to a 3PL model solidifies brokers’ and forwarders’ overall business relationship with importers and adds an element of business security to their customer base. If a company is using their FTZ services, then they are less likely to lose that firm to a competitor.

Familiarity with the nature of the business – and the availability of technology developed specifically for FTZs – allows brokers and forwarders to enter the 3PL space and manage or run FTZ operations for one or more importers. And, the transition is a relatively straightforward leap regardless of whether the FTZ is created for manufacturing or distribution purposes. The key requirement is being compliant with the strict rules CBP has instituted to govern FTZ operations, especially the tracking of inventory movement and the filing of scheduled reports on time. That’s where FTZ technology integrated with brokerage and forwarding solutions comes into play.

For QuestaWeb customers, addition of the FTZ solution to their broker and freight forwarder solutions is easy. For brokers and forwarders with other solutions, QuestaWeb’s FTZ solution can be integrated with virtually any other technology. Notably, QuestaWeb approaches the licensing of its FTZ technology in two different ways. Knowing that some firms will want to handle FTZ operations for multiple clients, we offer a system with a block of transactions that the 3PL can divide in any manner desired. 3PLs also can acquire standalone FTZ technology, especially for those customers that want the 3PL to manage its FTZ for them and integrate the FTZ solution with their ERP system. QuestaWeb can handle that integration or the 3PL can, as desired. Whatever business model brokers and forwarders select, QuestaWeb can accommodate.

Adopting the role of a 3PL enables brokers and forwarders to play a more strategic role in the supply chain. No longer are they merely handling individual shipments. They become supply chain managers able to offer recommendations to optimize processes, save money and address issues before they become challenges.

In an industry where the numbers of brokers, forwarders and even 3PLs are shrinking due to a marketplace highlighted by closures, sales and consolidations, it’s important to be aware of emerging trends and add versatility to your service offerings and revenue stream. Operating, managing and even offering consultation services regarding FTZs is a noteworthy movement for brokers and forwarders.